In our 3rd post in our rental property series, we want to make sure that the investment you have is actually a good deal! There is nothing more frustrating then owning a home you don’t live in, and it doesn’t net you a dime. Too many “absentee owners” don’t turn a profit on their investment properties, and they hope that they will recoup those losses at the time of sale. That is not always the case, so let’s make sure that your property nets you income throughout the time you own it, not just at the time of sale.
A great rental property depends on both tangible and intangible characteristics. Each investor will have his or her preferences for what constitutes a great rental property, but there are a few universal characteristics everyone can agree upon. Here are some ways to turn your investment into a great rental property in Richmond.
Having a rental property in a great location means you will have plenty of tenants to choose from. Your property will always be in demand, and you should experience low to no vacancy rates. To be safe, of course, you will still need to factor in the suggested vacancy rate to your rental proforma. Great rental properties are usually near high performing school systems, colleges and universities, grocery stores, shopping, entertainment, and may also be a short drive from major highways or other large attractions in the state.
Cash Flow & Growth Potential
A great rental property will have a positive cash flow every month with minimal expenses and minimal vacancy. Your rental property will also be great if it has growth potential. If it is in a great location and demand is high, you will be able to justify raising the rent especially if one tenant moves out and another is lined up to move in. Make sure you keep an eye on the Richmond market rental rate and stay close to that. If you mark your rent too high, you may deter some tenants.
A great rental property will be in excellent condition. You may have to do some upgrades to the kitchen or bathrooms at the time of original investment, but overall it will be worth it. Tenants are willing to pay for quality. Also, keep in mind, the better the condition of the property, the fewer repairs that will need to be made, and less likely the tenants will take it for granted. In general, they will work to keep the property in great shape for you!
A great rental property takes great property management! You may want to consider hiring a property management company to turn your investment into a great rental property. For help selecting a great property manager in Richmond or VA, give The Cash Offer Company a call at (804) 215-4004 to discuss your needs and intended level of involvement. You want to make sure you maintain the integrity of the structure and surrounding yards, all major appliances, and HVAC systems.
A great rental property will be valued at more than you paid for it! In order for this to happen, you may have to purchase your rental as a distressed property and put some money into it. If it’s in the right location with the right demand, your property value should slowly rise and make for a great profit in the future! Just make sure you hang on to it for more than a year, the longer the better for reduced capital gain taxes. When this happens, it makes for a great exit strategy.
However, a word of caution: to use an old adage, do not bite off more than you can chew. If you are not Chip and Joanna Gaines, don’t buy a house that needs a total redo and think you can do it yourself! These properties can be a huge financial and emotional drain if you buy a property that you can’t handle the renovations and upkeep on. Speaking from personal experience, by the property you can maintain, not the one that is the cheapest.
It is important to keep an eye on market trends for your rental property in Richmond. You want to make sure your rental is keeping up with the rental rates and property values. This will help your property make as much money as possible for a great rental property. This will also let you know when the best time to sell your investment is. If the market starts taking a downward turn, you want to make sure and sell your rental property while it will still make you a profit!